AUGUSTA, Maine (AP) — The state's Medicaid shortfall will be the dominant and most pressing issue as lawmakers return to the State House today to begin their 2012 session.

Gov. Paul LePage has proposed restructuring Medicaid to help address a state budget gap of $221 million through mid-2013.

House Speaker Robert Nutting, R-Oakland, said Tuesday that lawmakers face "tremendous challenges" in the weeks and months ahead, with Medicaid the most daunting of all.

Still, partisan rhetoric was flying Tuesday over Medicaid, known in the state as MaineCare. At issue was LePage's proposal to cut $60 million in Medicaid funds that keep elderly, veterans and disabled people in group homes known as private non-medical institutions.

Minority Democrats said the Republican governor has softened his call to drop group home coverage, but only after unnecessarily scaring about 5,000 of the state's most vulnerable people. All Medicaid programs cover 361,000 Mainers, about one-third the state's population.

"He put so many Maine families in a state of panic all for a political game. It is disturbing," said Rep. Peggy Rotundo of Lewiston, the lead House Democrat on the Appropriations Committee.

LePage's spokeswoman said the governor's intention all along was to encourage lawmakers to find an alternative funding source for private non-medical institutions, given his concerns the federal government might not approve funding for that purpose.

"His intention was never to kick the elderly out on the streets," said LePage spokeswoman Adrienne Bennett, who also accused Democrats of preying on people's fears for political gain.

Senate Majority Leader Jon Courtney said he's confident the Appropriations Committee can agree on the Medicaid changes he believes are needed to avoid annual crises over funding in the program. Committee consensus is critical to full legislative approval.

Courtney, R-Springvale, is also confident the Legislature can agree to Medicaid changes by Jan. 30, a deadline the governor says must be met to avoid having the program run out of money.

"I think we can get there. They understand the urgency. The longer they delay, the deeper the cuts," Courtney said.